The effect of controlled thermal annealing on charge transport and photogeneration in bulk-heterojunction solar cells made from blend films of regioregular poly(3-hexylthiophene) (P3HT) and methanofullerene (PCBM) has been studied. With respect to the charge transport, it is demonstrated that the electron mobility dominates the transport of the cell, varying from 10(-8) m(2) V-1 S-1 in as-cast devices to approximate to 3 x 10(-7) m(2) V-1 s(-1) after thermal annealing. The hole mobility in the P3HT phase of the blend is dramatically affected by thermal annealing. It increases by more than three orders of magnitude, to reach a value of up to approximate to 2 x 10(4) m(2) V-1 s(-1) after the annealing process, as a result of an improved crystallinity of the film. Moreover, upon annealing the absorption spectrum of P3HT:PCBM blends undergo a strong red-shift, improving the spectral overlap with solar emission, which results in an increase of more than 60% in the rate of charge-carrier generation. Subsequently, the experimental electron and hole mobilities are used to study the photocurrent generation in P3HT:PCBM devices as a function of annealing temperature. The results indicate that the most important factor leading to a strong enhancement of the efficiency, compared with non-annealed devices, is the increase of the hole mobility in the P3HT phase of the blend. Furthermore, numerical simulations indicate that under short-circuit conditions the dissociation efficiency of bound electron-hole pairs at the donor/acceptor interface is close to 90%, which explains the large quantum efficiencies measured in P3HT:PCBM blends.